build, buy or ally growth strategies for business

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1 Build, Buy or Ally Growth Strategies for Business Joe Deklic Vice President, Strategic Investments Group Cisco Systems Canada Co.

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A presentation by Joe Deklic Vice President, Strategic Investments Group Cisco Systems Canada Co.

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Page 1: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 1

Build, Buy or AllyGrowth Strategies for Business

Joe Deklic

Vice President, Strategic Investments Group

Cisco Systems Canada Co.

Page 2: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 2

Cisco: A culture of innovation

Cisco’s corporate culture encourages innovation

Innovation is the engine that drives growth

Page 3: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 3

John Chambers, President and CEO

“Philosophically, I don’t partner and then compete later. I won’t enter into strategic partnerships that I think will not have lasting evolution. … We share what we’re doing with them very closely and they share what they’re doing with us very closely.”

Page 4: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 4

“Companies that use both acquisitions and alliances grow faster than rivals do – as companies like Cisco have amply demonstrated.”

Page 5: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 5

Evolution Components of Innovation

Build Ally

Buy

Cisco’s innovation model has evolved beyond the 3 “Build – Buy – Ally” pillars

Collaborationinternally and externally with customers and partners is essential for innovative leadership going forward

Collaborate

Market

DynamicsPortfolio

Management

Page 6: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 6

Why Collaborate : Differentiation

Power of many

Time to execution

Alignment

Multiple competitive scenarios

Customers win

Page 7: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 7

Partners who Collaborate with other

Partners…

Page 8: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 8

Why Build: Technology Leadership

Pioneer in the field

Patentable technology

Need to own the intellectual property

Core business

Have time or can build in increments

Have in-house expertise

Page 9: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 9

Innovation at Cisco The Cycle of Innovation

Deploy

Differentiation

at Scale

Invent

Differentiated

Offering

Manage

Mission-critical

Processes

at Scale

Extract

Resources

to Reinvest

for Core

2. Deploy

1. Invent

3. Manage

4. Offload / Repurpose

Advanced

Technology

Foundation

Technology

Emerging

Technology

Reinvent

Technology

Funding

Page 10: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 10

Innovation at Cisco

This study has found that Cisco has laid a strong foundation for innovation by organizing its efforts around three elements critical to innovation success:

–People and Culture

–Process and Organization

–Products and Technology

Cisco does not exclusively establish innovation through acquisition but fosters and encourages innovative thinking, development, collaboration, and entrepreneurship throughout its organization.

Wharton study 2009

Page 11: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 11

Why Buy: Core to business

Core to business

Need intellectual property

Time critical

Shortage of in-house expertise

Acquire market leadership

Page 12: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 12

Internal Venture,

Financial Investment

Innovation at CiscoETG Pursues a New Growth Model

New

Existing

Existing New

Source: Prof. Ed Roberts, MIT Sloan School

Partner,

Acquire

Develop,

Acquire

Acquire,Partner

ETG

Focus

Market

Technologies

Page 13: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 13

Why Partner: Speed

Fastest Time to Market

Reduce Risk

Leap Frog Competition

Customize for Specific Markets

Customers buy best of breed

Page 14: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 14

Four Key Dynamics of Alliance Strategies should be Monitored to understand the Driving Forces in Market Space

Value Migration in the Market Space

Competitive Scenario Mapping

Ecosystem Evolution & our position in the this relative to the Customer

Life Cycle Management of each Alliance itself

Page 15: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 15

Value Migration

We must view Value Migration from the Customer’s Perspective

Process Migration

Design Cycle Time

Quality Systems (Six Sigma)

Fulfillment (Supplier-Distributor Delivery)

Market & Customer Needs Migration

Providing route-to-market for sales and service

-vertical expertise

-solutions integration

-unique geographic access

Providing complementary hardware and software

Providing integrated solutions for products and services

Page 17: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 17

Ecosystem Evolution

Development Logistics Distribution SalesService &

Support

CISCO

Strategic

Supplier

R&D

Outsourced

Manufacturer

Service &

SupportProvider

Customer

Customer

Parallel

Manufacturer

Distributor

Competitor

Co-

Marketing

Customer

Advertising

Agency

Where are Our Alliances?

Where are the “Points of

Power” in the network?

Create Competitive Advantage by Optimizing

Page 18: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 18

Future Sales Goal

Borrow(Alliances)

Buy(Acquire)

Build (internal

growth)

BU's Current Sales Level

InternalGrowth

$.5

B

Time

Sa

le

s

$1

.0B

Lifecycle Portfolio Management

Divestitures Bow-Out (exit)

Page 19: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 19

Every individual alliance goes through a unique life cycle

Evaluate Form Incubate Operate Transition Retire

Plan

communication

Build

operations

model

Business

planning

Partnering

value prop

Partner

engagement

model

Announce

alliance

Alliance

solutions

& initiativesField

engagement

& marketing

Secure

sponsors

Negotiations

& agreements

New alliance

launch

marketing

Metrics &

performance

reporting

Review

strategy &

value prop

Value curves

& trends

Update

strategy

goalsConfirm

joint

commitment

Determine

future

investment

Conduct

management

discussionsDetermine

exit

strategy

Build

exit plans

Define

activities &

timeline

Create

messaging

Structure

alliance

governance

Executive

comms &

boards

Define

Cisco

strategy

Analyze

portfolio

Evaluate

ecosystem

Evaluate

partner

Build

business

case

Intellectual

properties

Page 20: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 20

Before negotiations begin

Determine value proposition

Develop joint win-win

Build solid business plan

Evaluate

Page 21: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 21

Stages of successful negotiation

Pre-negotiation

Problem solving

Decision making

– Create mutual benefit

Alignment

– Revise and ratify agreement

Implementation

Form

Page 22: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 22

Delivering results

Develop operational dashboard

Clear metrics a must

Evaluate long-term returns

Variable model

Partner-dependent

Adjust resources to match results

Know when to call it quits

Operate

Page 23: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 23© 2006 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 23

Confirm joint commitment

“70% of alliances either fail outright, fall captive to shifting priorities, or achieve only initial goals, and 55% fall apart within three years after they are formed.”

The CEO RefresherVantage Partners

Transition

Page 24: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 24

Decision CriteriaWe need clear reasons to decide among alternatives

IFThese

Conditions

Risk

Level

Speed ofExpansionRequired Resource

Availability SimilarityChange in theEnvironment

Make Low Slow High The Same Slow

BuyLow to

ModerateModerate

High to

Moderate

High

SimilarityModerate

AllyHigh to

ModerateFast

Moderate to

LowDifferent Extensive

Internal Growth

M&A

Alliance

THEN

Page 25: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 25

In conclusion

Don’t win the negotiation and lose the alliance.

Each alliance has its own life cycle . Find it.

Find ways to win together; collaboration. Play for keeps.

Alliances is a learned skill (practice + training). Invest in it.

Page 26: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 26

Page 27: Build, Buy or Ally Growth Strategies for Business

© 2009 Cisco Systems, Inc. All rights reserved. Cisco ConfidentialPresentation_ID 27

Q and A